Claims can quickly derail construction projects. Nobody enjoys fielding them, but contractors must actively work to prevent and swiftly address any claims to protect their bottom line and stand with clients.
If contractors want to avoid future headaches and financial losses, they need to be proactive when it comes to managing claims. When managing construction claims, establish a claim management process and aim for a cost-effective bid that provides the highest value. Don’t forget about your existing claims – prioritize them! Ensure every detail is documented accurately and take an active role in overseeing operations for prolonged success.
In this blog, we are going to provide you with our 5 top tips for managing claims in construction, as well as their different types. So, let’s get started!
What is Claims Management in Construction?
Claims management in construction is the process of preventing, responding to, and resolving disputes that arise during a construction project. Claims can be filed by any party involved in the project, including owners, contractors, and subcontractors.
In today’s construction projects that incorporate multiple resources and parties, claims management is an invaluable process. One of the most potent techniques for avoiding potential disputes in the early stages of a project is by proactively eliminating their underlying causes before they manifest themselves.
Different Types of Claims in Construction
Change order claims: These arise when a project is modified or changed from its initial scope, resulting in additional costs for the contractor.
Delay claims: Also known as time-related claims, these occur when there are delays that impact the completion of the project and thus result in additional costs to the contractor.
Defects claims: These occur when there are defects or errors in the work completed, resulting in additional costs to correct them.
Termination claims: These involve disputes that arise when a contract is terminated prematurely due to an act or omission of one of the parties involved.
Disruption claims: These are filed when construction activities impede the progress of a project.
Impossibility of Performance claims: These are filed when the contractor cannot complete their work due to unforeseen circumstances such as an act of God or government intervention.
Liquidated Damages claims: These occurred when there were pre-agreed upon financial penalties in case the work is not completed on time or in an agreed-upon manner.
Design Deficiency claims: These arise when a contractor believes that the design of a project is inadequate for its intended purpose and results in additional costs to complete it correctly.
Inflationary Cost Increase claims: These are filed when there are direct cost increases due to inflation or other factors outside of the contractor’s control.
Intangible Loss claims: These involve losses that are not easily quantified, such as lost profits or business opportunities due to an unforeseen delay or disruption in the project.
5 Tips for Managing Claims in Construction
1. Establish a Claim Management Process
Develop a systematic process that is used to track and manage claims. Make sure all parties involved are clear on their responsibilities, documentation requirements, and procedures for resolving disputes.
It is important to create a well-structured and clearly defined procedure for managing claims. The process should cover everything from filing, responding to, and resolving disputes.
2. Aim for a Sensible Bid That Will Get You the Best Value
When bidding for a construction project, make sure you understand all the risks involved and aim for a cost-effective bid that will provide you with the highest value. Don’t forget to factor in your existing claims – prioritize them! Ensure that every detail is documented accurately.
Some contractors may opt to submit low bids in order to win the job; this could ultimately lead to increased costs and extend the timeline of completion. When you bid realistically, it allows for a fair contract price that sets realistic expectations from the beginning.
By establishing an exact scope of work before starting a project, you’ll not only be able to avoid any claims due to unforeseen events but also reduce your risk for claims throughout its entirety.
3. Don’t Neglect Your Pending Claims – Prioritize Them!
If you have any pending claims, it is important to prioritize them in order of importance. This will help ensure that your time and resources are allocated effectively and efficiently toward resolving them.
It is also essential to document any necessary evidence which may prove you right in the case of a dispute. This could include photos, emails, documents, contracts, and any other type of relevant information.
4. Record Every Detail Meticulously
In order to avoid any disputes and manage claims effectively, it is important to document everything related to the project. This includes daily activity logs, tasks completed, materials used, etc.
Make sure that all these details are recorded accurately in order to create an accurate timeline of events. This will help you track progress and refer back to it if needed in the future.
5. Perpetually Oversee Operations for Lasting Success
To ensure that all claims are managed properly, it is important to have a team of qualified professionals who continually monitor and oversee operations. They should be able to identify and address any potential issues before they become disputes.
Having an experienced construction manager or inspector onsite can help you stay on top of any changes in the scope of work, budget, and timeline. They can help pinpoint any potential claims that may arise due to unforeseen events and take immediate action to prevent them.
#1 8A Certified Contractor Valet Works
If you’re worried about the construction of your home’s interior or exterior, don’t hesitate to contact us at Valet Works. Valet Works is the #1 8A certified contractor in the USA, and we can ensure that your construction project will be completed on time and within the budget.
Contact us today to get started on your next construction project!